Wednesday, January 13, 2010

Keynes Is Kaput

Clear and simple way to make it clear that Keynesian "money-pumping" is not viable.

Simply put the problem is too much spending. The Keynesian prescription only works when there is additional debt service capacity in the private sector - when that is exhausted then the engine that is necessary to turn pump-priming into expansion (that is, private credit expansion) is absent and you are simply throwing the stimulus money down a black hole.

This recession began with the exhaustion of private debt-service capacity. It is for this reason that all the claimed Keynesian "solutions" have not and cannot work - there is simply no more margin between debt service capacity and outstanding debt levels in the private economy. This is proved month after month as bank credit continues to contract and consumer debt loads come down month after month.

Yup. Of course, in the case at hand, the Feds are mostly bailing out States/Locals; thus there is no NEW job-creation, for practical purposes--and, ergo, there is no NEW credit-carrying capacity in the private sector.

Worse, the Fed bailouts force States/Locals to continue the spending even after Fed money is bye-bye--which will repress private expenditures downtrack because they'll be eaten by tax increases.

Limbaugh thinks that in reality, that's Obama's plan. No reason to doubt it.

HT: Ticker


krshorewood said...

Why should anyone care what that racist slug Limbaugh thinks?

Dave said...


Let's see...two men who have subbed for him are black (Walt Williams and Thomas Sowell); a close friend and frequent commenter is black (Ken Hutcherson); he's also close friends with Clarence Thomas (who is, last I looked, black); and Bo Snerdley (his screener) is black. I don't think Limbaugh would have these people around him if he were an actual racist. Unless you have the cojones to call these men Oreos and Uncle Toms...

Jack Lohman said...

Of course. Bushnomics worked better. And let's not consider taking the political corruption out of our system. After all, campaign cash prompts government spending, and that leads to jobs. The best of two worlds!

Oh, sorry. Forgot to mention that government spending leads to taxes.

Dad29 said...

Well, I'm all for reducing Fed/State/Munis by 40% or so.

The less they do, the less the incentive for rent-seeking, the less tax/regulatory burden.....

You ready, Jack?

Jack Lohman said...

Sorry Dad, you can't do it and maintain a civil society. We're paying what, perhaps 30% of income in taxes? All while Sweden and Switzerland pays up to 50% and has full govt-funded health care and higher education... AND an unemployment rate of 3.4%!!! Instead you want to go back to the 1800's... everybody for themselves. Shootouts on main Street. No thank you.

We have high taxes because our special interests have bought and paid for them. Let's clean up the political system; put our politicians on an incentive program. You make it work well and you get paid more.